High cost seen for Asia if humans spread bird flu

High cost seen for Asia if humans spread bird flu

Susan Fenton Reuters Hong Kong

Fears are growing about the potential economic cost of the bird flu outbreak in Asia after a possible first transmission between humans, but the vulnerable tourism sector reports few cancelled holidays so far.

Thai shares fell nearly five percent on Monday and Hong Kong shares slipped two percent, led by airlines, hotels and retailers, as investors took fright at news two Vietnamese sisters who died from bird flu might have caught it from their sick brother.

Until now, victims were thought to have caught the bird flu from poultry and economists said a change to human transmission would have much more serious economic implications.

"At the moment the disease is largely restricted to where the chickens are," said Rob Subbaraman, regional economist at Lehman Brothers.

"But if we got strong evidence of transmission from human to human and there was a risk of it getting into crowded areas like shopping malls and public transport, it would cause an economic disruption."

Health experts worry the virus, which has so far killed 12 people, could combine with human flu to create a drug-resistant bug that could cause the world's next big pandemic -- dwarfing the impact of the SARS outbreak last year.

The Asian Development Bank estimates Severe Acute Respiratory Syndrome cost Asia US$60 billion as tourists cancelled trips and consumers fearing infection shunned restaurants and stores.

Meanwhile, Hong Kong's de-facto central bank, the Hong Kong Monetary Authority, reported on Monday monthly investment income from its Exchange Fund halved in the last week of January as nervous investors sold off on bird flu fears.

"If the disease is sustainable it is inevitable that we'll see capital outflows from Asian countries," the authority's Chief Executive, Joseph Yam, told reporters.

If bird flu did start being passed on by humans, past deadly flu outbreaks showed five percent of Hong Kong's population, some 300,000 people, could die of the disease, a scientist in the city said last week.

That would be a far greater toll than SARS, which killed nearly 300 in Hong Kong and tipped the economy into recession.

The Spanish flu pandemic of 1918 killed up to 50 million people worldwide. Asian flu and Hong Kong flu pandemics in the 1950s and 1960s killed a combined 4.5 million people.

Cancellations of holidays to the region so far are relatively light. Two French tour operators and up to 1,000 Japanese are reported to have cancelled tours to Vietnam, because of bird flu.

A big Shanghai travel operator said bookings had fallen to flu-affected countries like Vietnam and Thailand. Other travel sector officials said they expected cancellations in coming weeks.

Shares in Hong Kong's Cathay Pacific Airways, have fallen seven percent since Jan. 21 -- although the company may have arrested the fall on Monday when it reported it had seen no major cancellations due to bird flu.

Asia quickly rebounded from SARS on the back of a global recovery. Lehman Brothers has forecast the region's economy, exluding Japan, will grow 6.8 percent this year -- unless bird flu takes off.

"If we start seeing a drop-off in travel to the region we would consider downgrades to our economic forecasts," Subbaraman said.

Authorities have yet to confirm whether the Vietnamese sisters caught the flu from their brother. Even if they did, it was likely limited to only those who had close contact with the man, the World Health Organisation said.

But if bird flu does start spreading widely among people, Thailand and Indonesia are seen as the most vulnerable. Tourism accounts for six percent of Thailand's economy, much more than in other Southeast Asian countries.

Economists point to the impact wrought by SARS last year, which cost Thailand an estimated $1.5 billion in lost tourism income, despite the country largely avoiding the outbreak.

The Thai central bank said last week bird flu could lop 0.4 of a percentage point off economic growth but Supavud Saicheua, the managing director of Phatra Securities, said it would be much worse if the disease spread among humans. "It would be worse than SARS. We are bracing for it," he said.

Indonesia could be even more vulnerable, said Daniel Chan, senior investment strategist at DBS Bank. "I don't know whether they can contain the disease."